Legal: More than words can say

When Amey agreed to mend Birmingham’s potholes for 25 years, it should have understood it was forming a relationship – and not started picking holes in the contract wording to cut its workload

Amey Birmingham Highways took on the 25-year PFI contract to look after the road network in Birmingham some years back.

The task was the rehabilitation, maintenance, management and operation of the roads on a street-by-street basis, and it included on-going maintenance of footways, verges, cycle tracks and kerbs. The contract began in October 2010, and for the first three-and-a-half years it went well. Then the Birmingham city council performance manager noticed a most remarkable thing: some parts of the roads and footpaths were being left unrepaired. Photographs of defective paving and roads showed resurfacing up to a line and then beyond that line the old surface remaining untouched, for no apparent reason.

Amey explained that it had reread the contract and formed an ingenious new interpretation of the works that made its workload significantly lighter. But Amey would carry out what Birmingham city council wanted, provided it issued a change order and more money.

What is it about these PFI umpteen-year maintenance contracts? They seem to go to pieces with some regularity. At first everybody cuddles up. After a while, a few niggles arise. Then someone realises that the costs outweigh the income – or, even worse, someone realises that the contractor is going to make a handsome profit year in, year out, for decades to come. The parties begin to pick on each other and it all turns into a soap opera. Damn it – they have to live together for years to come!

What is it about these PFI umpteen-year maintenance contracts? At first everybody cuddles up. After a while, the parties begin to pick on each other and it all turns into a soap opera

The contract bumf on this maintenance jobby amounted to 5,190 pages, plus disks, plans and so: a formidable document. The definitions section alone ran to 200 pages. Somewhere around year four, Amey pointed to the original data at bid stage showing roads, footways, kerbs, verges and cycle tracks to be repaired and maintained, and drew the line at that. That original data showed the road, or whatever, and its condition. If it was in poor condition at that point, Amey would fix it. Amey updated the data, as required, but said any new defects not previously identified in the original data counted as extra works, once you read and interpreted the contract.

Bingo! We have a dispute. Birmingham city council called for an adjudicator. He dismissed Amey’s interpretation of the deal. Amey went to the High Court. The judge dismissed the adjudicator’s decision; Amey was right. Birmingham city council went to the Court of Appeal. Those three judges restored the adjudicator’s decision, saying the first judge was wrong. All that took from July 2015 to February 2018 – and, no doubt, pounds galore in legal fees. Amey argued that its job was to comply with the contract, no matter that it left the road or Birmingham city council in a hole. It was not the job of the court to rescue either party from a bad or even disastrous bargain.

Counsel for Amey pointed to the 2015 Supreme Court judgment in Arnold vs Britton, which promoted a literal interpretation of contracts above a purposive one: the court’s task is to identify what the parties have agreed in their contract, and apply that, notwithstanding how imprudent it was, nor what hindsight now says. The court cannot rewrite the bargain.

Now then, I suspect that the notion of repairing only three of the five pot-holes in Acacia Avenue, Birmingham, and half-a dozen paving slabs out of the 20 in a dangerous condition, was hard to swallow on the basis of words used in this 5,000-plus page contract. Did this 25-year deal really limit the task to repairing and maintaining the defects in the original data sheets?

A remark in the Court of Appeal judgment makes a good point about these long-term contracts: a PFI of 25 years’ duration is a “relational contract” and a contract document of massive length will contain, said the court, “many infelicities and oddities”. In which case, “both parties should adopt a reasonable approach in accordance with what is obviously the long-term purpose of the contract […] They should not be latching onto the infelicities and oddities, in order to disrupt the project and maximise their own gain.”

I think what this means is that a 25-year arrangement has implicit dimensions. Amey is looking after Birmingham’s roads and pavements. A relationship of this dimension has to produce an intelligent outcome. Mending holes in the road – or rather, mending some holes – is all very well for discrete, one-off contracts for specified holes in certain roads. Mending holes for 25 years, though, has a different intention. Tribunals, adjudicators and the courts must discover the parties’ intentions from the contract of the relationship as well as the formal document. Neither of those two items of legal reasoning was used on its own.

I go further: it would surprise me greatly if the now disappointed Amey does not actually understand that commercial reality of this decision, given that it is a “relationship” contract. Birmingham city council has a “relationship” with one of our first-class civils contractors. Nobody complains about the already repaired 500 miles of carriageway, 400 miles of pavements, 4,200 street lights. After all this litigation, the task now is to mend the “relationship”. It has another 17 years to run. A fence or two needs mending!

Postscript

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple